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Equitable Mortgage Ruling: Sy v. De Vera-Navarro

The case involved a disputed deed of sale over a parcel of land used as collateral for a loan. While the borrower claimed it was meant as additional security, the lender registered the land under a third party. The courts examined whether the deed was an equitable mortgage or sale. The Supreme Court ruled the deed was an equitable mortgage based on continued possession by the borrower and other factors showing the intent was to secure repayment of the loan, not conduct an actual sale.

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30 views2 pages

Equitable Mortgage Ruling: Sy v. De Vera-Navarro

The case involved a disputed deed of sale over a parcel of land used as collateral for a loan. While the borrower claimed it was meant as additional security, the lender registered the land under a third party. The courts examined whether the deed was an equitable mortgage or sale. The Supreme Court ruled the deed was an equitable mortgage based on continued possession by the borrower and other factors showing the intent was to secure repayment of the loan, not conduct an actual sale.

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angelicagonzales.billones93
Copyright
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SPOUSES SY v.

DE VERA-NAVARRO
G.R. No. 239088 (2019)

FACTS:
John Sy, as one of the co-owners of a parcel of land, borrowed from De Vera-
Navarro Php 3.7M as loan, secured by a REM over such property. Sy then alleged that
immediately after the execution of the Mortgage Contract, as per usual practice,
respondent De Vera-Navarro asked petitioner John to execute an undated Deed of
Absolute Sale with a stated consideration in the amount of Php 5,000,000.00,
supposedly for the purpose of providing additional security for the loan. To his
surprise, he was informed that the ownership over the property was transferred to De
vera-Navarro. Respondent then issued a new title to BHTLI, a third-party buyer. Sy
filed a complaint for declaration of nullity of the deed of sale between De Vera-
Navarro and BHTLI. Sy claims that they are the rightful owners of the subject
property.
The RTC ruled that the deed of sale was void, because it was an equitable
mortgage, since there was really no intention on the part of the parties to enter in a
contract of sale. The CA reversed, ruling that the case was only a dacion en pago.
Hence, this petition.

ISSUE: Whether or not the deed of sale was an equitable mortgage

RULING:
YES. Under Article 1602 of the Civil Code, a contract shall be presumed to be an
equitable mortgage in any of the following cases:
1) When the price of a sale with right to repurchase is unusually inadequate;
2) When the vendor remains in possession as lessee or otherwise;
3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed;
4) When the purchaser retains for himself a part of the purchase price;
5) When the vendor binds himself to pay the taxes on the thing sold;
6) In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.

It is not disputed by any party that the supposed vendor of the subject property,
petitioner John, remains to be in possession of the subject property despite
purportedly selling the latter to respondent De Vera-Navarro. It is uncanny for a
supposed buyer to desist from taking possession over property which he/she has
already purchased. The purchase price of the purported sale indicated in the undated
Deed of Absolute Sale is inadequate. The evidence on record shows that respondent
De Vera-Navarro retained for herself the supposed purchase price. Aside from the
testimony of petitioner John that no consideration was paid at all for the supposed
contract of sale, the RTC also noted that no proof was presented by respondent De
Vera-Navarro that she actually parted with the sum of Php 5,000,000.00 in favor of
petitioner John pursuant to the undated Deed of Absolute Sale. From the evidence
presented by petitioners Sps. Sy, it is established that the real intention of the parties
is for the purported contract of sale to merely secure the payment of their debt owing
to respondent De Vera Navarro.

Hence, the deed of sale was an equitable mortgage and not a legitimate contract of
sale. The petition is granted.

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